U.S. shares drop as Fed takes another step toward tapering

SYDNEY, Sept 20 Reuters - Asian shares eased and the dollar held firm on Monday ahead of a week capped by no less than a dozen central bank meetings, highlighted by the Federal Reserve which is likely to take another step toward tapering.

Holidays in Japan, China and South Korea made for a thin start, and politics add added uncertainty with elections in Canada and Germany bookending the week.

The fate of Chinese property giant Evergrande is also in the balance with a bond interest payment due on Thursday, and its $300 billion in liabilities.

Concerns about the health of Hong Kong's economy and the crackdown on tech firms continues to haunt the region. Stocks in Beijing particularly affected last week, with stocks in Beijing being hit hard by the worst consequences last week.

Early Monday, MSCI's broadest index of Asia-Pacific shares outside Japan dipped another 0.2%, after shedding 2.5% the previous week.

Japan's Nikkei was closed and could do with consolidating after breaking the 30 - year highs on hopes a new Prime Minister will bring more stimulus and policy change.

Nasdaq futures ended 0.1% unchanged and S&P 500 futures eased. Wall Street ended on a soft note after disappointing U.S. consumer confidence data.

Yields on 10 year Treasuries flattened a two month top and the curve touched before the meeting.

A flatter yield curve suggests some fears the Fed may overdo the eventual hiking cycle, cautioned Tapas Strickland, a director of economics at NAB.

He noted only 2 - 3 FOMC members would need to shift their dot plot forecasts for a hike in 2022 to make it the median, given seven of 18 had already tipped a move next year.

The Fed will also have dots for 2024 which will give an indication of the steepness of the potential hiking cycle. The market consensus is for two hikes in 2023 and four in 2024, with the longer-run fed funds rate seen at 2.125%.

Central banks in the EU, Japan, UK, Switzerland, Sweden, Norway, Indonesia, the Philippines, Taiwan Brazil, South Africa, Turkey and Hungary meet all this week.

The Norges Bank is expected to be the first in the G 10 to raise interest rates.

Higher U.S. yields combined with global risk aversion to benefit the dollar which was up near a one-month high at 93.232 on a basket of currencies.

It was range bound on the yen at 109.96, while the euro was near its lowest level in three weeks at $1.1728 in part due to uncertainty ahead of german election this weekend.

Canada goes to the polls on Monday, with the race too close to call.

The firmer dollar was held on gold, which was weighed at $1,753 one ounce after losing 1.9% last week.

Oil prices fell as energy companies in the U.S Gulf of Mexico restarted production after back-to-back hurricanes in the region shut output.

Brent fell 21 cents to $75.13 a barrel, while U.S. crude lost 24 cents to $71.73.